As this bull market nears its 10-year anniversary, many like the Leuthold Group’s Jim Paulsen are asking if it still “has a viable path forward.” In the 1990s, Paulsen notes that there was a “productivity miracle” that extended the most powerful bull market in history.

One might think that the advent of artificial intelligence and robotics could spawn another productivity revolution, but statistical data don’t support that view.  Paulsen attributes the productivity bust of the last two decades partly to modest U.S. investment spending.

In a letter to clients on January 3, one day before equities staged a 3 percent rally, he instead identified a “revaluation miracle” that, when combined with the recent economic slowdown, could allow the equity market to enjoy one more major rally. Last year’s surge in corporate profits also factors into his analysis.

Paulsen is hardly alone. Also on January 3, Blackstone vice chairman Byron Wien said he thought the the S&P 500 could rebound 15 percent this year. Such a move would still fall short of the 2018 highwater mark.

Here is Paulsen’s logic: “Last year, the S&P 500 multiple peaked at a price-to-earnings at a multiple of 24” times 12-month trailing earnings, he said. In recent weeks, this same multiple has drifted down to the 16 times trailing earnings area.

Looking back at multiples since 1990, Paulsen observes that the S&P has fallen from the top quintile to the bottom quintile in a mere 12 months. Going back further to the history of P/E multiples since 1950, he found that the S&P has fallen from the 92nd percentile to the 45th percentile and calls that a “revaluation miracle.”

This is not “end-of-bear-market” cheap, he adds. But it does provide investors with some potential upside, assuming that inflation and interest rates stop rising and a recession is averted. Much of that scenario is in place.

Paulsen also thinks a recession will be averted for the forseeable future. GDP growth is likely to slow to 2 percent in 2019, but that should keep inflation in check. Private balance sheets are in excellent shape and this leaves consumers positioned to spend.

At the same time, confidence has only come back in the last few years. And overconfidence, the primary cause of recessions, is still absent. The performance of equities in the last quarter probably helped nip expectations of euphoria in the bud.